The California Healthcare Association has adopted a draft policy on the rights and charitable obligations of not-for-profit healthcare organizations when they convert to for-profit status.
The group, formerly the California Association of Hospitals and Health Systems, will review any proposed state or federal legislation on conversions in the light of its policy.
The policy was prompted by Blue Cross of California's conversion to for-profit status through the creation of WellPoint Health Networks. The change focused state legislators' attention on the obligations of converting companies.
Gov. Pete Wilson signed a bill last year governing the conversions of not-for-profit health plans. With Columbia/HCA Healthcare Corp. acquiring hospitals in California, legislators' attention has now turned to the conversions of not-for-profit hospitals.
"There is a risk that legislation on this subject may interfere with the legitimate activities of not-for-profit health organizations, including relationships with investor-owned companies," C. Duane Dauner, the association's president, wrote in a Jan. 5 letter to the group's board.
At its meeting last week, the board approved a draft policy stating that not-for-profits "are impressed with a charitable trust which must be honored when (they) are converted or restructured."
At the same time, not-for-profits "must retain authority, without undue government intervention, to engage in a full range of legal transactions with investor-owned entities to support the purposes and missions" of the not-for-profit organizations.
The association intends to incorporate its policy into a bill on conversions authored by state Rep. Phil Isenberg (D-Sacramento).
Meanwhile, in the latest round of Blue Cross' struggle with state officials, Consumers Union last week urged regulators to stop WellPoint from purchasing an out-of-state company-the group health and life subsidiary for Massachusetts Mutual Life Insurance Co.-for $380 million (Jan. 15, p. 3) until Blue Cross meets its charitable obligations. Blue Cross had planned to donate $3 billion to foundations as part of its failed merger with Health Systems International.